The role and the role of central banks and currency brokers

Forex helps central banks to stabilize currency

Central banks play in the wholesale (interbank) foreign exchange market very important role. On entering the Forex particularly in relation to the implementation of the foreign exchange interventions , which through its dealers buy or sell a foreign currency in order to either stabilize the domestic currency exchange rate , or to secure such an exchange rate of its currency, which is consistent with the objectives of its monetary policy. It follows that the primary objective of central banks in the Forex tradingis not profit, but meet predetermined objectives of the monetary policy.

The role of foreign exchange brokers

Forex brokers are agents who facilitate trading in foreign currencies . Usually traded only on the client's account. Themselves so they do not hold any open position, ie. themselves do not carry currency risk . For their services they charge fees. Service Broker is used primarily by bank dealers who wish to remain anonymous, because knowledge of their identities could adversely affect the market direction.

Example: Bank of some major local corporations, who had just collected the foreign operations of a substantial amount (eg $ 100 million), enter the Forex with intent to exchange those dollars for the crown. If the bank's identity known, is also known its intention, as well as the scope of this project .Market to be logically respond by reducing purchase (bid) Czech koruna against the dollar. Other entities in the Forex because they know that the bank will want to sell a significant amount of dollars.They will therefore try to take advantage of this situation so that the dollar buys less. Broker does not therefore counterpart, displays only classes, which receives from banks, which is connected.

Another advantage of broker services is relatively narrow exchange rate spread. Broker is only displayed the highest purchase (bid) rates and low sales (ask, offer) courses, which receives from individual dealers. If you want a broker dealer quoted rate for foreign currency (base currency in the currency pair) buy, writes or says (after a telephone line) simply the English word "missing". If he wants a foreign currency (base currency in the currency pair) to sell, the English term "yours." Broker to quickly respond to the same command in relation to the bank, whose kotoval course, that he suffered no open currency positions.

The function performs a broker today often called electronic terminals or use electronic brokers . It is in essence a computerized information system that processes individual commands automatically.